NEW YORK, Nov 4 Intel Corp was sued by New
York Attorney General Andrew Cuomo, who accused the world's
largest chipmaker of threatening computer makers and paying
billions of dollars in kickbacks to maintain its market
dominance.

The lawsuit accuses Intel (INTC.O) of violating state and
federal antitrust law through a "systematic worldwide campaign"
of bullying and coercion to monopolize the market for personal
computer chips, at the expense of rival Advanced Micro Devices
Inc AMD.N.

Intel's microprocessors power more than 80 percent of the
world's PCs. Wednesday's lawsuit comes on the heels of several
antitrust probes throughout the world into the Santa Clara,
California-based company's business practices.

Cuomo said Intel for several years bribed or coerced
computer makers such as Dell Inc DELL.O, Hewlett-Packard Co
(HPQ.N) and International Business Machines Corp (IBM.N) to use
its microprocessors or stop using those of rivals.

The alleged wrongdoing included kickbacks in the form of
"rebates" and threats of retaliation for using rival chips.

Top officers including Intel Chief Executive Paul Otellini
were aware of some of the activity, according to emails cited
in the lawsuit filed in federal court in Wilmington, Delaware.

In a conference call with reporters, Cuomo said Intel's "my
way or the highway" has corroded competition, while forcing
consumers and businesses to overpay for chips.

"We intend to stop them," he said.

The 83-page lawsuit seeks to stop Intel's anti-competitive
conduct, and also seeks triple damages and other remedies.

"Consumers have paid more for slower computers and
competition has been dampened," said David Balto, a former
Federal Trade Commission official who became a senior fellow at
the Center for American Progress, a think tank.

INTEL TO DEFEND ITSELF

Intel spokesman Chuck Mulloy said the company would defend
itself against Cuomo's charges. "Neither customers who have
benefited from lower prices and increased innovation nor
justice are being served by the decision to file a case now,"
he said.

In afternoon trading, Intel shares were up 30 cents, or 1.6
percent, at $18.66 on the Nasdaq.

"I have a hard time thinking it's not within people's
expectations," said Doug Freedman, a technology analyst at
Broadpoint AmTech in San Francisco, referring to the lawsuit.

"If we look at antitrust cases in the past, you really only
need to go look at Microsoft (MSFT.O) and you say, did it
really have an investable impact?" Freedman said. "I think the
answer is no."

Other regulators worldwide have also examined possible
antitrust violations by Intel.

In July, the company appealed a 1.06 billion euro ($1.57
billion) fine by the European Union two months earlier.

The Federal Trade Commission, meanwhile, opened a formal
inquiry into Intel in June 2008, and at least three of four
commissioners have backed the filing of a complaint, people
familiar with the review have said.

An FTC representative declined to comment on Wednesday.
Cuomo's office said it is cooperating with the FTC inquiry.

AMD has its own four-year-old lawsuit against Intel, which
is scheduled to go to trial in March, court records show.

A spokesman for AMD, Tom McCoy, said stopping Intel's
wrongdoing "will serve the settled purpose of the American
antitrust laws: ensuring that innovation is unconstrained and
competition is free to serve consumers."

"JIHAD"

Wednesday's complaint includes several emails that Cuomo
said demonstrate Intel's illegal activities.

According to the complaint, Dell founder Michael Dell wrote
a Nov. 10, 2005, email to Otellini where he complained about
losing competitive ground.

Otellini replied that Intel was transferring more than $1
billion annually to Dell, an amount "judged by your team to be
more than sufficient to compensate for the competitive issues,"
the lawsuit said.

In another instance cited in the complaint, a Dell
executive expressed worry in 2004 that if Dell were to use some
AMD chips, Otellini and then-chief executive Craig Barrett were
"prepared for jihad."

Eric Corngold, a deputy New York attorney general, on the
conference call said top executives' involvement shows "this
isn't the story of a few rogue employees going too far."

Cuomo has pursued many high-profile lawsuits and probes as
New York's top legal officer. The Democrat is expected to run
for the state's governorship in 2010.

The case is New York v. Intel Corp, U.S. District Court,
District of Delaware.
(1 euro = US$1.484)
(Reporting by Jonathan Stempel; Additional reporting by Diane
Bartz in Washington, and Gabriel Madway and Ian Sherr in San
Francisco; Editing by Derek Caney and John Wallace, Gary Hill)

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